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Toy Fair 2020, which took place on 21 January 2020

Don’t Just Toy with the Idea of Product Liability Protection

Feb 2020

Toy Fair 2020, which took place on 21 January 2020, had many new products on show, tempting buyers into potentially doing what many Western toy businesses do – relying on overseas manufacturers for their toy merchandise.

China has been a growth area for toy production as have other Asian countries. Many large brands now have well established overseas route, for example Lego – having a real resurgence - manufactures in China, as well as in the Czech Republic and Mexico.[1] Even some of the most recognisable toys because of their association with movie franchises start their journey to the shops from overseas.

Experience within the UK toy sector suggests that anyone importing plastic toys – or other goods from abroad - needs to consider whether they have a requirement for specialist Product Liability protection. If they are exporting, the same consideration should apply.

One major reason for this, which many importers may not appreciate, is that the law allows both producers and distributors to be prosecuted, if a product is proved dangerous or defective[2] under the terms of the General Product Safety Regulations. Anyone in the supply chain can be prosecuted, not just the manufacturer deemed at fault.

The court then considers the supply chain’s marketing and its duty of care – looking at aspects such as the instructions provided to the customer – to assess what the manufacturer or suppliers might have reasonably expected the purchaser to do with the product when using it.

Facing a legal action like this can be expensive and time-consuming. If a product causes harm, a claim for personal injury could also be lodged, leaving a business’s finances exposed and this is not due to just the potential fines that could be imposed, through to logistical costs in getting the good returned, the associated PR costs that will come with a product recall, and potential stock price falls, for public companies through to direct repair and return costs. What may seem small can soon snowball into major costs.

Product liability is an area that needs careful consideration, whether you are importing products or manufacturing them in the UK and exporting them. Often, the type of insurance coverage required is a package specifically tailored to the individual needs of a business, rather than a generic, off-the-shelf policy. This is where an insurance broker comes in, as they can analyse the individual circumstances and highlight the potential risks that will be involved in the import and export markets involved and ensure the correct coverage is provided to the client for the specific risks that a business needs to protect against.

Over-reliance on suppliers can also become an issue for a business, with a sudden removal of supply causing business interruption, which could, for some, prove disruptive or critical. The reason is, as the 2018 British Community Institute’s Supply Chain Resilience Report highlighted - 47% of businesses do not have their supply-chain losses insured.[3] Insurance for such losses should also be considered, according to the individual risks to the business.